The New York State Public Service Commission’s approval last week of the $1.5 billion acquisition of Central Hudson by Canadian holding company Fortis Inc. represents a victory of corporate interests over the public interest, a victory made possible in large part by the gutting of consumer protections in the state and a corporate-funded massive media campaign, which citizens simply couldn’t compete with.
Without putting words in his mouth, that’s the inescapable conclusion one reaches after talking with Assemblyman Kevin Cahill, who has been raising questions about the deal ever since it was first announced in early 2012. Describing Fortis’ $49.25 million package of promised ratepayer benefits as “the weakest ever for a public utility in a takeover,” Cahill, former chairman of the Assembly Energy Committee, said one of the prime reasons the deal got through was that key former consumer protection organizations, such as the Consumer Protection Board and the Citizens Utility Board, have been dissolved, leaving ratepayers without a voice.
Two years ago, the Utility Intervention Unit (UIU) of the Consumer Protection Board had been dismantled and shifted over the state Department of State, where it was no longer an independent entity and reduced to a staff of two. (That compares to more than 20 people in New Jersey and around 30 in Connecticut who advocate on behalf of the public for utility-related issues, Cahill said.) Both people supported the deal, which Cahill attributed to a lack of resources to properly investigate. In contrast, in the past, when it was part of the Consumer Protection Board, “the UIU had the right to file an appeal automatically to Commission decisions and challenge the agency,” an ability that “significantly constrained” the authority of the Commission, Cahill said.
“That possibility of appeal and the knowledge there was a very high likelihood their actions would be subject to a judicial review led to circumspection on the part of everybody else,” he said. “In this case, the Commission had a high level of confidence its decision would not be subject to review.”
Cahill also said he was “nervous” about future Central Hudson rate increases. While Fortis promised to hold electric and gas delivery rates steady through July 1, 2015, the assemblyman theorized that Fortis, now having to deal with $1.5 billion worth of acquisition costs, will try to get that money back as fast as it can. “Invariably, those costs are recovered through the rate process,” said Cahill.
Cahill isn’t the only one angry about the PSC’s vote. In its statement last week, Citizens for Local Power (CLP), an Ulster-based grassroots group whose lobbying efforts against the merger were joined by 16 municipalities that passed resolutions opposed to the deal, accused the Commission of making a decision “without providing any substantive response to the many risks and problems documented by CLP and the Municipal Consortium in Opposition.”
The commission “has rubber-stamped a proposal that serves corporate interests at the expense of the communities affected by this decision,” noted CLP’s statement. It ignored “Fortis’ weaker financial status and high debt load,” which “will inevitably lead to higher rates for customers and may endanger the very existence of the local utility.”
In 2012, Fortis and CH Energy Group, Central Hudson’s parent company, announced that it and Fortis had entered into an agreement for Fortis to acquire CH Energy Group for $65 in cash per share, representing an aggregate purchase price of approximately $1.5 billion, including the assumption of approximately $500 million of debt at closing.
Central Hudson, the main business of CH Energy Group, serves about 300,000 electric and 75,000 natural gas customers in eight Mid-Hudson counties.
Prospects for an appeal
Daniel Duthie, a utilities attorney representing CLP, said after carefully reviewing the Commission’s written order, that the group might consider an appeal. Duthie outlined two options: the first is filing a petition with the Commission for a rehearing, which would have to be submitted within 30 days of the written order. The chances of success are slim, “particularly when a decision is unanimous” — as is the case here, Duthie said.
The second option would be to make an appeal to the state Supreme Court’s Appellate Division, permitted under Article 78 of Civil Practice Law & Rules — an article often used to force a review of government actions. “You have to convince the appellate division that the commission’s decision was arbitrary or capricious, which means it lacks a rational basis, or it is not supported by substantial evidence,” Duthie said. Those chances of success are by no means assured, given that “the bar to get a successful review is set very high.” And should the CLP succeed in making its case, the division would reverse the decision and have it sent back to the agency for another consideration.